x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
|
04-3523891
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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|
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600 Technology Park Drive, Suite 200
Billerica, Massachusetts
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|
01821
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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¨
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|
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015
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Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (Unaudited)
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Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015 (Unaudited)
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (Unaudited)
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Item 1.
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Consolidated Financial Statements (Unaudited)
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(in thousands, except share data)
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September 30,
2016 |
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December 31,
2015 |
||||
ASSETS
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(Unaudited)
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
215,402
|
|
|
$
|
122,672
|
|
Short-term investments (Note 5)
|
67,293
|
|
|
—
|
|
||
Accounts receivable, net (Note 9)
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38,548
|
|
|
42,530
|
|
||
Inventories, net (Note 10)
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32,663
|
|
|
12,024
|
|
||
Prepaid expenses and other current assets
|
7,901
|
|
|
4,283
|
|
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Current assets of discontinued operations (Note 3)
|
—
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|
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9,252
|
|
||
Total current assets
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361,807
|
|
|
190,761
|
|
||
Property and equipment, net (Note 2)
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50,911
|
|
|
41,793
|
|
||
Other intangible assets, net (Note 11)
|
651
|
|
|
933
|
|
||
Goodwill
|
39,730
|
|
|
39,607
|
|
||
Other assets
|
98
|
|
|
76
|
|
||
Long-term assets of discontinued operations (Note 3)
|
—
|
|
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1,956
|
|
||
Total assets
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$
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453,197
|
|
|
$
|
275,126
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
$
|
18,212
|
|
|
$
|
15,213
|
|
Accrued expenses and other current liabilities (Note 12)
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33,732
|
|
|
36,744
|
|
||
Deferred revenue
|
1,247
|
|
|
2,361
|
|
||
Current portion of capital lease obligations (Note 7)
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1,061
|
|
|
5,519
|
|
||
Current liabilities of discontinued operations (Note 3)
|
—
|
|
|
5,319
|
|
||
Total current liabilities
|
54,252
|
|
|
65,156
|
|
||
Capital lease obligations (Note 7)
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—
|
|
|
269
|
|
||
Long-term debt, net (Note 6)
|
328,962
|
|
|
171,698
|
|
||
Other long-term liabilities
|
4,888
|
|
|
3,952
|
|
||
Total liabilities
|
388,102
|
|
|
241,075
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Stockholders’ Equity
|
|
|
|
||||
Preferred stock, $.001 par value:
|
|
|
|
||||
Authorized: 5,000,000 shares at September 30, 2016 and December 31, 2015.
Issued and outstanding: zero shares at September 30, 2016 and December 31, 2015.
|
—
|
|
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—
|
|
||
Common stock, $.001 par value:
|
|
|
|
||||
Authorized: 100,000,000 shares at September 30, 2016 and December 31, 2015.
Issued and outstanding: 57,418,432 and 56,954,830 shares at September 30, 2016 and December 31, 2015, respectively. |
57
|
|
|
57
|
|
||
Additional paid-in capital
|
736,730
|
|
|
686,193
|
|
||
Accumulated other comprehensive loss
|
(387
|
)
|
|
(654
|
)
|
||
Accumulated deficit
|
(671,305
|
)
|
|
(651,545
|
)
|
||
Total stockholders’ equity
|
65,095
|
|
|
34,051
|
|
||
Total liabilities and stockholders’ equity
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$
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453,197
|
|
|
$
|
275,126
|
|
|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands, except share and per share data)
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|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenue
|
|
$
|
94,871
|
|
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$
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71,393
|
|
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$
|
263,414
|
|
|
$
|
180,092
|
|
Cost of revenue
|
|
39,230
|
|
|
39,823
|
|
|
113,265
|
|
|
88,814
|
|
||||
Gross profit
|
|
55,641
|
|
|
31,570
|
|
|
150,149
|
|
|
91,278
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
|
13,734
|
|
|
10,035
|
|
|
39,676
|
|
|
30,311
|
|
||||
Sales and marketing
|
|
22,147
|
|
|
21,307
|
|
|
69,119
|
|
|
55,025
|
|
||||
General and administrative
|
|
17,342
|
|
|
15,023
|
|
|
47,923
|
|
|
42,062
|
|
||||
Total operating expenses
|
|
53,223
|
|
|
46,365
|
|
|
156,718
|
|
|
127,398
|
|
||||
Operating income (loss)
|
|
2,418
|
|
|
(14,795
|
)
|
|
(6,569
|
)
|
|
(36,120
|
)
|
||||
Interest expense
|
|
3,029
|
|
|
3,167
|
|
|
9,252
|
|
|
9,567
|
|
||||
Other income, net
|
|
211
|
|
|
21
|
|
|
510
|
|
|
76
|
|
||||
Loss on extinguishment of long-term debt
|
|
2,551
|
|
|
—
|
|
|
2,551
|
|
|
—
|
|
||||
Interest expense and other income, net
|
|
(5,369
|
)
|
|
(3,146
|
)
|
|
(11,293
|
)
|
|
(9,491
|
)
|
||||
Loss from continuing operations before income taxes
|
|
(2,951
|
)
|
|
(17,941
|
)
|
|
(17,862
|
)
|
|
(45,611
|
)
|
||||
Income tax expense (Note 15)
|
|
66
|
|
|
44
|
|
|
195
|
|
|
83
|
|
||||
Net loss from continuing operations
|
|
$
|
(3,017
|
)
|
|
$
|
(17,985
|
)
|
|
$
|
(18,057
|
)
|
|
$
|
(45,694
|
)
|
Loss from discontinued operations, net of tax ($0 and $18 for the three months ended September 30, 2016 and 2015, respectively and $408 and $68 for the nine months ended September 30, 2016 and 2015, respectively)
|
|
(64
|
)
|
|
(942
|
)
|
|
(1,703
|
)
|
|
(499
|
)
|
||||
Net loss
|
|
$
|
(3,081
|
)
|
|
$
|
(18,927
|
)
|
|
$
|
(19,760
|
)
|
|
$
|
(46,193
|
)
|
Net loss per share basic and diluted:
|
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations per share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.81
|
)
|
Net loss from discontinued operations per share
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
Weighted-average number of shares used in calculating net loss per share
|
|
57,341,063
|
|
|
56,898,281
|
|
|
57,189,423
|
|
|
56,735,944
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
|
$
|
(3,081
|
)
|
|
$
|
(18,927
|
)
|
|
$
|
(19,760
|
)
|
|
$
|
(46,193
|
)
|
Other comprehensive (loss) income, net of tax
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment, net of tax
|
|
(102
|
)
|
|
(457
|
)
|
|
302
|
|
|
(454
|
)
|
||||
Unrealized loss on available-for-sale securities
|
|
(43
|
)
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
||||
Total other comprehensive (loss) income, net of tax
|
|
(145
|
)
|
|
(457
|
)
|
|
267
|
|
|
(454
|
)
|
||||
Total comprehensive loss
|
|
$
|
(3,226
|
)
|
|
$
|
(19,384
|
)
|
|
$
|
(19,493
|
)
|
|
$
|
(46,647
|
)
|
|
|
Nine Months Ended September 30,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|
|
|
|
||||
Net loss
|
|
$
|
(19,760
|
)
|
|
$
|
(46,193
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
|
|
|
|
|
||||
Depreciation and amortization
|
|
10,474
|
|
|
11,406
|
|
||
Non-cash interest expense
|
|
6,117
|
|
|
5,721
|
|
||
Stock-based compensation expense
|
|
16,850
|
|
|
13,852
|
|
||
Loss on extinguishment of long-term debt
|
|
2,551
|
|
|
—
|
|
||
Provision for bad debts
|
|
1,889
|
|
|
2,762
|
|
||
Other
|
|
139
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
2,994
|
|
|
5,286
|
|
||
Inventories
|
|
(21,287
|
)
|
|
312
|
|
||
Prepaid expenses and other assets
|
|
(3,268
|
)
|
|
42
|
|
||
Accounts payable, accrued expenses and other current liabilities
|
|
(632
|
)
|
|
11,782
|
|
||
Deferred revenue
|
|
(982
|
)
|
|
703
|
|
||
Other long-term liabilities
|
|
756
|
|
|
370
|
|
||
Net cash (used in) provided by operating activities
|
|
(4,159
|
)
|
|
6,043
|
|
||
Cash flows from investing activities
|
|
|
|
|
||||
Purchases of property and equipment
|
|
(19,205
|
)
|
|
(7,126
|
)
|
||
Purchases of short-term investments
|
|
(76,241
|
)
|
|
—
|
|
||
Receipts from the sale of short-term investments
|
|
8,905
|
|
|
—
|
|
||
Proceeds from divestiture of business, net (Note 3)
|
|
5,714
|
|
|
—
|
|
||
Acquisition of Canadian distribution business
|
|
—
|
|
|
(4,715
|
)
|
||
Net cash used in investing activities
|
|
(80,827
|
)
|
|
(11,841
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
||||
Principal payments of capital lease obligations
|
|
(4,727
|
)
|
|
(4,283
|
)
|
||
Proceeds from issuance of convertible notes, net of issuance costs
|
|
333,904
|
|
|
—
|
|
||
Repayment of convertible notes
|
|
(153,628
|
)
|
|
—
|
|
||
Proceeds from issuance of common stock, net of offering costs
|
|
4,848
|
|
|
7,043
|
|
||
Payment of withholding taxes in connection with vesting of restricted stock units
|
|
(2,839
|
)
|
|
(2,468
|
)
|
||
Net cash provided by financing activities
|
|
177,558
|
|
|
292
|
|
||
Effect of exchange rate changes on cash
|
|
158
|
|
|
(220
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
92,730
|
|
|
(5,726
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
122,672
|
|
|
151,193
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
215,402
|
|
|
$
|
145,467
|
|
Non-cash investing and financing activities
|
|
|
|
|
||||
Purchases of property and equipment under capital lease
|
|
$
|
—
|
|
|
$
|
5,721
|
|
Allocation to equity for conversion feature for issuance of convertible notes
|
|
$
|
66,689
|
|
|
$
|
—
|
|
Allocation to equity for conversion feature for the repurchase of convertible notes
|
|
$
|
(32,865
|
)
|
|
$
|
—
|
|
•
|
The evidence of an arrangement generally consists of a physician order form, a patient information form and, if applicable, third-party insurance approval for sales directly to patients or a purchase order for sales to a third-party distributor.
|
•
|
Transfer of title and risk and rewards of ownership are passed to the patient or third-party distributor upon shipment of the products.
|
•
|
The selling prices for all sales are fixed and agreed with the patient or third-party distributor and, if applicable, the patient’s third-party insurance provider(s) prior to shipment and are based on established list prices or, in the case of certain third-party insurers, contractually agreed upon prices. Provisions for discounts, rebates and other adjustments to customers are established as a reduction to revenue in the same period the related sales are recorded.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Amgen, Inc.
|
|
17%
|
|
10%
|
|
17%
|
|
10%
|
Ypsomed Distribution AG
|
|
16%
|
|
15%
|
|
15%
|
|
11%
|
RGH Enterprises, Inc.
|
|
10%
|
|
14%
|
|
10%
|
|
13%
|
Note
|
4
|
|
Page
|
||
|
|
|
|
|
|
Convertible Debt
|
Note
|
6
|
|
Page
|
|
|
|
|
|
|
|
Note
|
9
|
|
Page
|
||
|
|
|
|
|
|
Note
|
10
|
|
Page
|
||
|
|
|
|
|
|
Other Intangible Assets
|
Note
|
11
|
|
Page
|
|
|
|
|
|
|
|
Accrued Expenses and Other Current Liabilities- Product Warranty Costs
|
Note
|
12
|
|
Page
|
|
|
|
|
|
|
|
Equity-
Stock-Based Compensation
|
Note
|
14
|
|
Page
|
|
|
|
|
|
|
|
Note
|
15
|
|
Page
|
||
|
|
|
|
|
|
Segment Reporting
|
Note
|
16
|
|
Page
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
Revenue
(1)
|
|
$
|
—
|
|
|
$
|
15,910
|
|
|
$
|
7,730
|
|
|
$
|
44,014
|
|
Cost of revenue
|
|
133
|
|
|
11,829
|
|
|
5,502
|
|
|
32,459
|
|
||||
Gross profit
|
|
(133
|
)
|
|
4,081
|
|
|
2,228
|
|
|
11,555
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
|
—
|
|
|
2,887
|
|
|
1,542
|
|
|
8,381
|
|
||||
General and administrative
|
|
(69
|
)
|
|
2,133
|
|
|
1,853
|
|
|
3,779
|
|
||||
Total operating expenses
|
|
(69
|
)
|
|
5,020
|
|
|
3,395
|
|
|
12,160
|
|
||||
Interest and other income (expense), net
|
|
—
|
|
|
15
|
|
|
(128
|
)
|
|
174
|
|
||||
Loss from discontinued operations before taxes
|
|
(64
|
)
|
|
(924
|
)
|
|
(1,295
|
)
|
|
(431
|
)
|
||||
Income tax expense
|
|
—
|
|
|
18
|
|
|
408
|
|
|
68
|
|
||||
Net loss from discontinued operations
|
|
$
|
(64
|
)
|
|
$
|
(942
|
)
|
|
$
|
(1,703
|
)
|
|
$
|
(499
|
)
|
|
|
|
|
|
(1)
|
Revenue for the nine months ended September 30, 2016 includes revenue from the operations of Neighborhood Diabetes through date of sale in February 2016.
|
(in thousands)
|
December 31,
2015 |
||
ASSETS
|
|
||
Accounts receivable, net
|
$
|
5,857
|
|
Inventories, net
|
2,019
|
|
|
Prepaid expenses and other current assets
|
1,376
|
|
|
Total current assets of discontinued operations
|
9,252
|
|
|
Intangible assets, net
|
1,788
|
|
|
Goodwill
|
140
|
|
|
Other non-current assets
|
28
|
|
|
Total long-term assets of discontinued operations
|
1,956
|
|
|
Total assets of discontinued operations
|
$
|
11,208
|
|
LIABILITIES
|
|
||
Accounts payable
|
$
|
3,436
|
|
Accrued expenses and other current liabilities
|
1,883
|
|
|
Current liabilities of discontinued operations
|
5,319
|
|
|
Total liabilities of discontinued operations
|
$
|
5,319
|
|
•
|
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
|
•
|
Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence.
|
•
|
Income approach, which is based on the present value of the future stream of net cash flows.
|
|
Fair Value Measurements
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
September 30, 2016
|
|
|
|
|
|
|
|
||||||||
Recurring fair value measurements:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
200,355
|
|
|
$
|
200,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
1,900
|
|
|
—
|
|
|
1,900
|
|
|
—
|
|
||||
Certificates of deposit
|
445
|
|
|
445
|
|
|
—
|
|
|
—
|
|
||||
Total cash equivalents
|
$
|
202,700
|
|
|
$
|
200,800
|
|
|
$
|
1,900
|
|
|
$
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency bonds
|
$
|
29,032
|
|
|
$
|
15,018
|
|
|
$
|
14,014
|
|
|
$
|
—
|
|
Corporate bonds
|
25,540
|
|
|
—
|
|
|
25,540
|
|
|
—
|
|
||||
Certificates of deposit
|
12,721
|
|
|
12,721
|
|
|
—
|
|
|
—
|
|
||||
Total short-term investments
|
$
|
67,293
|
|
|
$
|
27,739
|
|
|
$
|
39,554
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Recurring fair value measurements:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
98,223
|
|
|
$
|
98,223
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-recurring fair value measurements:
|
|
|
|
|
|
|
|
||||||||
Long-term assets of discontinued operations
(1)
|
$
|
1,788
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,788
|
|
|
|
|
|
|
(1)
|
Long-term assets of discontinued operations relate to the asset group of the Neighborhood Diabetes business which consists of definite lived intangible assets and property and equipment. During the fourth quarter of 2015, the Company recognized an impairment charge on this asset group totaling
$9.1 million
, which represented the difference between the fair value of the asset group and the carrying value. As a result of the impairment, the asset group was recorded at fair value as of December 31, 2015. The fair value for the asset group was determined using the direct cash flows expected to be received from the disposition of the asset group, which was completed in February 2016 (level 3 input).
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying
Value
|
|
Estimated Fair
Value
|
|
Carrying
Value |
|
Estimated Fair
Value |
||||||||
2% Convertible Senior Notes
|
$
|
59,058
|
|
|
$
|
73,832
|
|
|
$
|
171,698
|
|
|
$
|
207,882
|
|
|
|
|
|
|
|
|
|
||||||||
1.25% Convertible Senior Notes
|
$
|
269,904
|
|
|
$
|
339,163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Amortized cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
September 30, 2016
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency bonds
|
$
|
29,036
|
|
|
$
|
2
|
|
|
$
|
(6
|
)
|
|
$
|
29,032
|
|
Corporate bonds
|
25,571
|
|
|
—
|
|
|
(31
|
)
|
|
25,540
|
|
||||
Certificates of deposit
|
12,721
|
|
|
—
|
|
|
—
|
|
|
12,721
|
|
||||
Total short-term investments
|
$
|
67,328
|
|
|
$
|
2
|
|
|
$
|
(37
|
)
|
|
$
|
67,293
|
|
|
September 30,
2016 |
|
December 31, 2015
|
||||
Principal amount of the 2% Convertible Senior Notes
|
$
|
67,084
|
|
|
$
|
201,250
|
|
Principal amount of the 1.25% Convertible Senior Notes
|
345,000
|
|
|
—
|
|
||
Unamortized debt discount
|
(73,148
|
)
|
|
(25,704
|
)
|
||
Deferred financing costs
|
(9,974
|
)
|
|
(3,848
|
)
|
||
Long-term debt, net carrying amount
|
$
|
328,962
|
|
|
$
|
171,698
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Contractual coupon interest
|
$
|
1,041
|
|
|
$
|
1,007
|
|
|
$
|
3,054
|
|
|
$
|
3,019
|
|
Amortization of debt discount
|
1,901
|
|
|
1,650
|
|
|
5,330
|
|
|
4,876
|
|
||||
Amortization of debt issuance costs
|
222
|
|
|
281
|
|
|
785
|
|
|
844
|
|
||||
Total interest expense from the Notes
|
$
|
3,164
|
|
|
$
|
2,938
|
|
|
$
|
9,169
|
|
|
$
|
8,739
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Manufacturing equipment
|
$
|
13,705
|
|
|
$
|
13,705
|
|
Less: Accumulated amortization
|
(6,401
|
)
|
|
(4,346
|
)
|
||
Total
|
$
|
7,304
|
|
|
$
|
9,359
|
|
Years Ending December 31,
|
Minimum Lease
Payments
|
||
2016 (remaining)
|
$
|
808
|
|
2017
|
269
|
|
|
Total future minimum lease payments
|
$
|
1,077
|
|
Interest expense
|
16
|
|
|
Total capital lease obligations
|
$
|
1,061
|
|
|
Three and Nine Months Ended September 30,
|
||||
|
2016
|
|
2015
|
||
2.00% Convertible Senior Notes
|
1,442,433
|
|
|
4,327,257
|
|
1.25% Convertible Senior Notes
|
5,910,954
|
|
|
—
|
|
Unvested restricted stock units
|
971,814
|
|
|
862,044
|
|
Outstanding options
|
3,541,936
|
|
|
2,959,320
|
|
Total dilutive common share equivalents
|
11,867,137
|
|
|
8,148,621
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||
Amgen, Inc.
|
29
|
%
|
|
22
|
%
|
Ypsomed Distribution AG
|
15
|
%
|
|
19
|
%
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Trade receivables, gross
|
$
|
42,391
|
|
|
$
|
46,668
|
|
Allowance for doubtful accounts
|
(3,843
|
)
|
|
(4,138
|
)
|
||
Total accounts receivable, net
|
$
|
38,548
|
|
|
$
|
42,530
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Raw materials
|
$
|
1,477
|
|
|
$
|
632
|
|
Work-in-process
|
5,508
|
|
|
1,960
|
|
||
Finished goods, net
|
25,678
|
|
|
9,432
|
|
||
Total inventories
|
$
|
32,663
|
|
|
$
|
12,024
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||||||||
Contractual relationships, net
|
$
|
2,039
|
|
|
$
|
(1,388
|
)
|
|
$
|
651
|
|
|
$
|
1,933
|
|
|
$
|
(1,000
|
)
|
|
$
|
933
|
|
Total intangible assets
|
$
|
2,039
|
|
|
$
|
(1,388
|
)
|
|
$
|
651
|
|
|
$
|
1,933
|
|
|
$
|
(1,000
|
)
|
|
$
|
933
|
|
Years Ending December 31,
|
Contractual Relationships
|
||
2016 (remaining)
|
$
|
111
|
|
2017
|
185
|
|
|
2018
|
158
|
|
|
2019
|
132
|
|
|
2020
|
65
|
|
|
Thereafter
|
—
|
|
|
Total
|
$
|
651
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Employee compensation and related items
|
19,529
|
|
|
16,856
|
|
||
Professional and consulting services
|
5,958
|
|
|
5,654
|
|
||
Suppliers
|
643
|
|
|
4,981
|
|
||
Other
|
7,602
|
|
|
9,253
|
|
||
Total accrued expenses and other current liabilities
|
$
|
33,732
|
|
|
$
|
36,744
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Balance at the beginning of the period
|
$
|
4,294
|
|
|
$
|
3,167
|
|
|
$
|
4,152
|
|
|
$
|
2,614
|
|
Warranty expense
|
1,149
|
|
|
1,579
|
|
|
3,288
|
|
|
3,300
|
|
||||
Warranty claims settled
|
(1,101
|
)
|
|
(992
|
)
|
|
(3,098
|
)
|
|
(2,160
|
)
|
||||
Balance at the end of the period
|
$
|
4,342
|
|
|
$
|
3,754
|
|
|
$
|
4,342
|
|
|
$
|
3,754
|
|
Years Ending December 31,
|
Minimum Lease
Payments
|
||
2016 (remaining)
|
$
|
624
|
|
2017
|
2,449
|
|
|
2018
|
2,383
|
|
|
2019
|
2,390
|
|
|
2020
|
2,383
|
|
|
Thereafter
|
4,515
|
|
|
Total
|
$
|
14,744
|
|
|
Number of
Options (#)
|
|
Weighted Average
Exercise Price ($)
|
|
Aggregate
Intrinsic
Value ($)
|
|||||
|
|
|
|
|
(In thousands)
|
|||||
Balance, December 31, 2015
|
2,999,199
|
|
|
$
|
31.37
|
|
|
|
||
Granted
|
967,918
|
|
|
$
|
31.32
|
|
|
|
||
Exercised
(1)
|
(226,296
|
)
|
|
$
|
19.54
|
|
|
$
|
4,440
|
|
Canceled
|
(198,885
|
)
|
|
$
|
32.60
|
|
|
|
||
Balance, September 30, 2016
|
3,541,936
|
|
|
$
|
32.05
|
|
|
$
|
32,243
|
|
Vested, September 30, 2016
(2)
|
1,347,219
|
|
|
$
|
31.63
|
|
|
$
|
12,837
|
|
Vested and expected to vest, September 30, 2016
(2)(3)
|
3,230,071
|
|
|
|
|
$
|
29,427
|
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value was calculated based on the positive difference between the pre-tax fair value of the Company’s common stock as of the date of exercise and the exercise price of the underlying options.
|
(2)
|
The aggregate intrinsic value was calculated based on the positive pre-tax difference between the closing price of the Company’s common stock as of
September 30, 2016
, and the exercise price of the underlying options.
|
(3)
|
Represents the number of vested options as of
September 30, 2016
, plus the number of unvested options expected to vest as of
September 30, 2016
, based on the unvested options outstanding at
September 30, 2016
, adjusted for the estimated forfeiture.
|
|
Number of
Shares (#)
|
|
Weighted
Average Grant Date
Fair Value ($)
|
|||
Balance, December 31, 2015
|
811,965
|
|
|
$
|
32.30
|
|
Granted
|
581,777
|
|
|
29.69
|
|
|
Vested
|
(309,024
|
)
|
|
30.73
|
|
|
Forfeited
|
(112,904
|
)
|
|
33.23
|
|
|
Balance, September 30, 2016
|
971,814
|
|
|
$
|
31.14
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Current
|
$
|
71
|
|
|
$
|
44
|
|
|
$
|
283
|
|
|
$
|
83
|
|
Deferred
|
(5
|
)
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
||||
Income tax expense
|
$
|
66
|
|
|
$
|
44
|
|
|
$
|
195
|
|
|
$
|
83
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
U.S. Omnipod
|
$
|
59,641
|
|
|
$
|
50,738
|
|
|
$
|
166,691
|
|
|
$
|
135,835
|
|
International Omnipod
|
19,107
|
|
|
13,570
|
|
|
51,046
|
|
|
24,990
|
|
||||
Drug Delivery
|
16,123
|
|
|
7,085
|
|
|
45,677
|
|
|
19,267
|
|
||||
Total
|
$
|
94,871
|
|
|
$
|
71,393
|
|
|
$
|
263,414
|
|
|
$
|
180,092
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
United States
|
$
|
75,764
|
|
|
$
|
57,823
|
|
|
$
|
212,368
|
|
|
$
|
155,102
|
|
All other
|
19,107
|
|
|
13,570
|
|
|
51,046
|
|
|
24,990
|
|
||||
Total
|
$
|
94,871
|
|
|
$
|
71,393
|
|
|
$
|
263,414
|
|
|
$
|
180,092
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
United States
|
$
|
25,431
|
|
|
$
|
13,018
|
|
China
|
25,477
|
|
|
28,638
|
|
||
Other
|
101
|
|
|
213
|
|
||
Total
|
$
|
51,009
|
|
|
$
|
41,869
|
|
•
|
risks associated with our dependence on our principal product, the Omnipod System;
|
•
|
fluctuations in quarterly results of operations;
|
•
|
our ability to sustain or reduce production costs and increase customer orders and manufacturing volumes;
|
•
|
adverse changes in general economic conditions;
|
•
|
impact of healthcare reform laws;
|
•
|
our inability to raise additional funds in the future on acceptable terms or at all;
|
•
|
potential supply problems or price fluctuations with sole source or third-party suppliers on which we are dependent;
|
•
|
the potential establishment of a competitive bid program;
|
•
|
failure to retain supplier pricing discounts and achieve satisfactory gross margins;
|
•
|
failure to retain key supplier and payor partners;
|
•
|
international business risks;
|
•
|
our inability to secure and retain adequate coverage or reimbursement for the Omnipod System by third-party payors and potential adverse changes in reimbursement rates or policies relating to the Omnipod System;
|
•
|
failure to retain key payor partners and their members;
|
•
|
failure to retain and manage successfully our Medicare and Medicaid business;
|
•
|
potential adverse effects resulting from competition;
|
•
|
reliance on information technology systems and our ability to control related risks, including a cyber-attack or other breach or disruption of these systems;
|
•
|
technological breakthroughs and innovations adversely affecting our business, and our own new product development initiatives may prove to be ineffective or not commercially successful;
|
•
|
potential termination of our license to incorporate a blood glucose meter into the Omnipod System, or our inability to enter into new license agreements;
|
•
|
challenges to the further development of our non-insulin drug delivery business;
|
•
|
our ability to protect our intellectual property and other proprietary rights; conflicts with the intellectual property of third-parties, including claims that our current or future products infringe or misappropriate the proprietary rights of others;
|
•
|
adverse regulatory or legal actions relating to the Omnipod System;
|
•
|
our products and operations are subject to extensive government regulation, which could restrict our ability to carry on or expand our operations;
|
•
|
failure of our contract manufacturers or component suppliers to comply with the FDA’s quality system regulations;
|
•
|
potential adverse impact resulting from a recall, or discovery of serious safety issues, of our products;
|
•
|
the potential violation of federal or state laws prohibiting “kickbacks” or protecting the confidentiality of patient health information, or any challenge to or investigation into our practices under these laws;
|
•
|
product liability lawsuits that may be brought against us;
|
•
|
reduced retention rates of our customer base;
|
•
|
unfavorable results of clinical studies relating to the Omnipod System or the products of our competitors;
|
•
|
potential future publication of articles or announcement of positions by diabetes associations or other organizations that are unfavorable to the Omnipod System;
|
•
|
the concentration of substantially all of our manufacturing operations at a single location in China and substantially all of our inventory at a single location in Massachusetts;
|
•
|
our ability to attract and retain personnel;
|
•
|
our ability to manage our growth;
|
•
|
risks associated with potential future acquisitions or investments in new businesses;
|
•
|
our ability to generate sufficient cash to service all of our indebtedness;
|
•
|
the expansion of our distribution network;
|
•
|
our ability to successfully maintain effective internal control over financial reporting;
|
•
|
the volatility of the price of our common stock;
|
•
|
risks related to future sales of our common stock or the conversion of any of our 2% Convertible Senior Notes due June 15, 2019 and 1.25% Convertible Senior Notes due September 15, 2021;
|
•
|
potential indemnification obligations in connection with the disposition of our former Neighborhood Diabetes supplies business;
|
•
|
potential limitations on our ability to use our net operating loss carryforwards; and
|
•
|
anti-takeover provisions in our organizational documents.
|
•
|
Total revenue of $
94.9 million
|
◦
|
U.S. Omnipod revenue of $
59.6 million
|
◦
|
International Omnipod revenue of $
19.1 million
|
◦
|
Drug Delivery revenue of $
16.1 million
|
TABLE 1: RESULTS OF OPERATIONS (Unaudited)
|
|||||||||||||||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||
(In Thousands)
|
2016
|
|
2015
|
|
Change $
|
|
Change %
|
|
2016
|
|
2015
|
|
Change $
|
|
Change %
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
U.S. Omnipod
|
$
|
59,641
|
|
|
$
|
50,738
|
|
|
$
|
8,903
|
|
|
18
|
%
|
|
$
|
166,691
|
|
|
$
|
135,835
|
|
|
$
|
30,856
|
|
|
23
|
%
|
International Omnipod
|
19,107
|
|
|
13,570
|
|
|
5,537
|
|
|
41
|
%
|
|
51,046
|
|
|
24,990
|
|
|
26,056
|
|
|
104
|
%
|
||||||
Drug Delivery
|
16,123
|
|
|
7,085
|
|
|
9,038
|
|
|
128
|
%
|
|
45,677
|
|
|
19,267
|
|
|
26,410
|
|
|
137
|
%
|
||||||
Total revenue
|
94,871
|
|
|
71,393
|
|
|
23,478
|
|
|
33
|
%
|
|
263,414
|
|
|
180,092
|
|
|
83,322
|
|
|
46
|
%
|
||||||
Cost of revenue
|
39,230
|
|
|
39,823
|
|
|
(593
|
)
|
|
(1
|
)%
|
|
113,265
|
|
|
88,814
|
|
|
24,451
|
|
|
28
|
%
|
||||||
Gross profit
|
55,641
|
|
|
31,570
|
|
|
24,071
|
|
|
76
|
%
|
|
150,149
|
|
|
91,278
|
|
|
58,871
|
|
|
64
|
%
|
||||||
Gross margin
|
58.6
|
%
|
|
44.2
|
%
|
|
|
|
|
|
57.0
|
%
|
|
50.7
|
%
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
13,734
|
|
|
10,035
|
|
|
3,699
|
|
|
37
|
%
|
|
39,676
|
|
|
30,311
|
|
|
9,365
|
|
|
31
|
%
|
||||||
Sales and marketing
|
22,147
|
|
|
21,307
|
|
|
840
|
|
|
4
|
%
|
|
69,119
|
|
|
55,025
|
|
|
14,094
|
|
|
26
|
%
|
||||||
General and administrative
|
17,342
|
|
|
15,023
|
|
|
2,319
|
|
|
15
|
%
|
|
47,923
|
|
|
42,062
|
|
|
5,861
|
|
|
14
|
%
|
||||||
Total operating expenses
|
53,223
|
|
|
46,365
|
|
|
6,858
|
|
|
15
|
%
|
|
156,718
|
|
|
127,398
|
|
|
29,320
|
|
|
23
|
%
|
||||||
Operating income (loss)
|
2,418
|
|
|
(14,795
|
)
|
|
(17,213
|
)
|
|
(116
|
)%
|
|
(6,569
|
)
|
|
(36,120
|
)
|
|
(29,551
|
)
|
|
(82
|
)%
|
||||||
Interest expense and other income, net
|
(5,369
|
)
|
|
(3,146
|
)
|
|
2,223
|
|
|
71
|
%
|
|
(11,293
|
)
|
|
(9,491
|
)
|
|
1,802
|
|
|
19
|
%
|
||||||
Income tax expense
|
66
|
|
|
44
|
|
|
22
|
|
|
50
|
%
|
|
195
|
|
|
83
|
|
|
112
|
|
|
135
|
%
|
||||||
Loss from discontinued operations, net of tax
|
(64
|
)
|
|
(942
|
)
|
|
(878
|
)
|
|
(93
|
)%
|
|
(1,703
|
)
|
|
(499
|
)
|
|
1,204
|
|
|
241
|
%
|
||||||
Net loss
|
$
|
(3,081
|
)
|
|
$
|
(18,927
|
)
|
|
$
|
(15,846
|
)
|
|
(84
|
)%
|
|
$
|
(19,760
|
)
|
|
$
|
(46,193
|
)
|
|
$
|
(26,433
|
)
|
|
(57
|
)%
|
|
|
Nine Months Ended
September 30,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Cash (used in) provided by:
|
|
|
|
|
||||
Operating activities
|
|
$
|
(4,159
|
)
|
|
$
|
6,043
|
|
Investing activities
|
|
(80,827
|
)
|
|
(11,841
|
)
|
||
Financing activities
|
|
177,558
|
|
|
292
|
|
||
Effect of exchange rate changes on cash
|
|
158
|
|
|
(220
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
92,730
|
|
|
$
|
(5,726
|
)
|
Contractual obligations
|
Total
|
|
2016 (remaining)
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Later
|
||||||||||||||
Operating lease obligations
|
$
|
14,744
|
|
|
$
|
624
|
|
|
$
|
2,449
|
|
|
$
|
2,383
|
|
|
$
|
2,390
|
|
|
$
|
2,383
|
|
|
$
|
4,515
|
|
Debt obligations (1)
|
437,673
|
|
|
671
|
|
|
5,655
|
|
|
5,655
|
|
|
72,068
|
|
|
4,312
|
|
|
349,312
|
|
|||||||
Capital lease obligations (2)
|
1,077
|
|
|
808
|
|
|
269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Purchase obligations (3)
|
63,274
|
|
|
21,885
|
|
|
31,757
|
|
|
9,632
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total contractual obligations
|
$
|
516,768
|
|
|
$
|
23,988
|
|
|
$
|
40,130
|
|
|
$
|
17,670
|
|
|
$
|
74,458
|
|
|
$
|
6,695
|
|
|
$
|
353,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Description
|
|
|
|
4.1
|
|
Indenture, dated as of September 13, 2016, between Insulet Corporation and Wells Fargo Bank, National Association, as Trustee (previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K on September 13, 2016 and incorporated by reference herein)
|
|
|
|
4.2
|
|
Form of 1.25% Convertible Senior Notes due 2021 (included in Exhibit 4.1) (previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K on September 13, 2016 and incorporated by reference herein)
|
|
|
|
4.3
|
|
Amendment No. 2 to Shareholder Rights Agreement dated August 30, 2016 (previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K on August 30, 2016 and incorporated by reference herein)
|
|
|
|
10.1+
|
|
Materials Supplier Agreement between Insulet Corporation and Flextronics Medical Sales and Marketing, Ltd., dated September 1, 2016
|
|
|
|
10.2+
|
|
Master Equipment and Services Agreement between Insulet Corporation and ATS Automation Tooling Systems Inc., dated August 31, 2016
|
|
|
|
31.1
|
|
Certification of Patrick J. Sullivan, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of Michael L. Levitz, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of Patrick J. Sullivan, Chief Executive Officer, and Michael L. Levitz, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101
|
|
The following materials from Insulet Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (eXtensible Business Reporting Language), as follows:
|
|
|
|
|
|
(i) Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015
|
|
|
|
|
|
(ii) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and September 30, 2015 (Unaudited)
|
|
|
|
|
|
(iii) Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2016 and September 30, 2015 (Unaudited)
|
|
|
|
|
|
(iv) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and September 30, 2015 (Unaudited)
|
|
|
|
|
|
(iv) Condensed Notes to Consolidated Financial Statements (Unaudited)
|
|
|
|
+
|
|
Application has been made to the Securities and Exchange Commission for confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.
|
|
|
|
|
INSULET CORPORATION
(Registrant)
|
|
|
Date: November 4, 2016
|
/s/ Patrick J. Sullivan
|
|
Patrick J. Sullivan
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date: November 4, 2016
|
/s/ Michael L. Levitz
|
|
Michael L. Levitz
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
22.
|
Short Supply/End of Life Components, Materials, Software and Firmware
|
1.
|
General
. This Agreement, together with all schedules and exhibits attached hereto along with all documents and/or prior agreements expressly incorporated by reference is the entire agreement and will be the controlling document in business dealings between the Parties with respect to the Products (as defined in Section 3 below) supplied hereunder. It supersedes all prior and contemporaneous agreements (including without limitation that certain Manufacturing Services Agreement by and between the Parties dated as of January 3, 2007, as amended to date), purchase orders and acknowledgments between the Parties relating to such Products, except as expressly stated below. Purchase commitments will be made only by means of Purchase Orders as defined in Section 6(a)(ii) below. Insulet and Supplier preprinted terms and conditions on any future purchase order, invoice, acknowledgment or other standard form shall not apply unless expressly agreed to in the particular case by both Parties in writing.
|
2.
|
Term of Agreement
. The initial term of this Agreement shall commence upon the Effective Date and shall be for the period identified above as “
Initial Contract Term
”, unless earlier terminated pursuant to Section 16 herein. Upon the expiration of the Initial Contract Term, the term of this Agreement shall automatically extend until the earlier of: (a) termination of this Agreement by (i) Insulet upon at least [*] ([*]) [*] prior written notice to Supplier or (ii) Supplier upon at least [*] ([*]) [*] prior written notice to Insulet; or (b) replacement of this Agreement by another written agreement of the Parties. The Initial Contract Term together with any extensions as provided by this Section 2 is referred to in this Agreement as the “
Term
”.
|
3.
|
Products; Supply Commitment
.
|
a.
|
Products
. This Agreement covers purchases of products listed on
Exhibit A
attached hereto and incorporated herein by reference or added to
Exhibit A
as provided below (collectively, “
Products
”). Each Product is defined by reference to a Insulet drawing (each, a “
Drawing
”). Drawings are referenced by part number and revision level and may include and/or reference: specifications, test instructions, quality instructions, manufacturing instructions, assembly instructions and a bill of materials (including approved vendors). Each Drawing and all documents referenced therein, as well as all revisions to Drawings made in accordance with this Section 3, are referred to in this Agreement as the “
Specifications
” for the Products covered by the Drawing. For each business day Supplier shall provide to Insulet a daily report, in an electronic format, detailing all the applicable information relating to the manufacture of Products in a form mutually agreed to by the Parties. Supplier agrees to provide such reports in a form and to include such information and metrics that Insulet may request from time to time.
|
b.
|
Additional Products
. From time to time, the Parties may mutually agree to add Products to this Agreement by executing an amended
Exhibit A
. However, in the absence of an amended
Exhibit A
, if Supplier issues a written price quotation to Insulet (whether in response to a Drawing submitted by Insulet, as part of a pricing event contemplated by this Section 3 or Sections 4, or as part of a new product proposal by Supplier), and Insulet places order(s) for such product, then such product shall automatically be deemed added to
Exhibit A
at the price quoted and shall be deemed a Product under this Agreement.
|
c.
|
Changes to Specifications
. Drawings may be revised from time to time as mutually agreed in writing between the Parties (either by execution of an amended
Exhibit A
that references the new revision level or other writings of the Parties). Supplier shall not unreasonably withhold approval to Drawings or Specifications changes proposed in writing by Insulet (each change an “
Engineering Change
” or “
EC
”). Supplier will use commercially reasonable efforts to evaluate the feasibility of the EC requested by Insulet within [*] ([*]) business days of receipt and respond to Insulet in writing with the potential impact of the EC on current on-hand or on-order component inventory, work-in-progress Products (“
WIP
”), finished goods Products, and/or the Delivery Schedule. In addition to the written response provided above, Supplier will use commercially reasonable efforts to respond to Insulet within [*] ([*]) business days with a written evaluation of the EC including: (i) engineering time to implement the EC, (ii) the cost to modify Tools or test fixtures or similar non-recurring expenses, (iii) the quantity of Obsolete Items (as defined in Section 8(a) below) Supplier has on hand and/or on order with its suppliers related to the EC, (iv) the cost to rework WIP (if applicable) and any impacts to Product price resulting from the EC, (v) the expected effect on the Delivery Schedule to include (if applicable) the effect on all in-process work (e.g., re-workable, repairable, etc.), (vi) any changes to Supply Chain Profiles, and (vii) the manner in which the EC will be implemented by Supplier. Supplier will not proceed to implement the EC until Insulet has approved the charges and Supplier actions described in the Supplier evaluation that is provided to Insulet.
|
d.
|
Manufacturing and Delivery Commitment
. For the Term of this Agreement, Supplier commits to supply to Insulet, in accordance with the terms and conditions hereof, such quantities of the Products listed on
Exhibit A
(including those added as provided above) as Insulet may choose to order under the terms of this Agreement and which Supplier has agreed to supply in accordance with the terms hereof. There are no purchase volume commitments by Insulet under this Agreement (except for the binding forecast in Section 6(a)(i)), and Insulet reserves the right to purchase the Products or similar items from other suppliers. If Supplier fails to deliver the total quantity of Products ordered by Insulet in any Purchase Order by the date of delivery specified therein, then, (i) at Insulet’s option, Insulet may have the remaining portion of the order of Product shipped by air freight at Supplier’s sole cost and expense and (ii) Supplier shall use commercially reasonable efforts to identify the root cause of the failure and provide such information to Insulet as soon as reasonably possible. Thereafter, the Parties agree to engage in a management review and remediation process to prevent such failure from reoccurring. Regardless of whether Insulet orders replacement or substitute Products from another source, Supplier shall remain obligated to deliver the total quantity ordered by Insulet, unless Insulet notifies Supplier that Insulet is canceling its order with respect to the amount of the shortfall.
|
4.
|
Prices
.
|
a.
|
General
. During the Term, prices shall be calculated in accordance with the price model set forth on
Exhibit A
(including those for Products added to
Exhibit A
as provided in Section 3 above). All prices shall be in U.S. Dollars. The purchase price shall include all costs for adequate packaging as suitable for transport by road and/or as further specified under the Specifications listed in this
Exhibit A
.
|
b.
|
Cost Reduction
. Supplier hereby agrees to identify areas wherein cost savings can be realized and passed on to Insulet through productivity improvements and cost savings (“
Cost Savings
”). Such Cost Savings shall be reflected as a reduction of prices set forth in
Exhibit A
. Supplier hereby agrees to use commercially reasonable efforts to [*]; provided, that Insulet will review and approve any recommended productivity change requested by Supplier as soon as practicable after submission of such change; provided, further, in each case, that such requested change does not otherwise adversely impact the quality of the Products.
|
c.
|
Process Improvements
. In the event Supplier implements any operational excellence or other process improvements at Insulet’s suggestion and under Insulet’s guidance, Supplier shall pass 100% of the savings attributable to such improvement, after Supplier recoups costs and expenses specifically and actually incurred by Supplier as a result of the development and implementation of such improvements (if any), along to Insulet and such savings shall not be included in the Productivity Savings Goal set forth above.
|
d.
|
Business Review
. Insulet may conduct reviews of the Supplier’s operations, books and records, and other documentation relating to the pricing model and components thereof agreed to by the parties at reasonable times and upon reasonable notice, annually during the Term and more often as may reasonably be necessary in order to ensure compliance with the provisions of this Agreement.
|
e.
|
Taxes
. Except to the extent that Insulet’s purchase of the Products is exempt from such taxes as evidenced by a written certification of exemption provided by Insulet, Insulet shall bear all applicable sales, use, excise, value added (VAT) or similar federal, state, municipal and other taxes payable with respect to the sale by Supplier to Insulet of the Products as finished goods and any property taxes assessable on the Products after delivery to Insulet. If Supplier is required to collect and remit any such taxes, then Supplier shall add such taxes to the invoice for sale of the Products, and Supplier agrees to remit such taxes as collected to the proper taxing authorities. With respect to the medical device excise tax pursuant to IRC §4191 (“
MDET
”), Supplier hereby acknowledges and agrees that for purposes of this Agreement, Insulet shall be deemed the holder of the regulatory filing with respect to all applicable products and is therefore deemed the manufacturer of such products. Furthermore, Insulet shall be deemed the responsible payor with respect to MDET and Supplier hereby acknowledges and agrees that it shall not remit or make any payments with respect thereto. To the extent that Supplier does remit or make payment for MDET, Supplier acknowledges and agrees that Insulet will not reimburse Supplier for any portion of such payments. Supplier shall be responsible for payment of any taxes relating to the Products or production thereof that are not based on transfer of the Products to Insulet or that are based on the income of Supplier (rather than on the transfer of the Products). Each Party hereby indemnifies the
|
5.
|
Shipping
.
|
a.
|
Shipping Terms
. The Parties agree that the shipping terms for each Product sold hereunder on
Exhibit A
shall be [*] (Incoterm 2010) [*] facility as specified by the parties. Except as otherwise set forth on
Exhibit A
, the following terms shall apply to all Products and components Supplier purchases for use in manufacturing the Products: [*] shall arrange for shipping through carriers designated by [*] who will invoice the shipping charges directly to [*] for all inbound and outbound shipments to and from Supplier for or on behalf of Insulet. (Alternatively, if directed by Insulet, Supplier shall arrange shipping (pursuant to instructions which Supplier shall request from Insulet's Shipping Department) and prepay and add the shipping charges to the invoice as a separate line item). Supplier shall bear all risk of loss or damage to Products until the Products are delivered to [*]. Supplier shall obtain, at Supplier’s expense, all export licenses and shall carry out all customs formalities related to the export of the goods. Insulet agrees to provide Supplier, within [*] ([*]) days of request, with each of the following in order to enable Supplier to fulfill its responsibility for export formalities: (i) export control classification numbers and harmonized tariff schedule information for Insulet’s assemblies and sub-assemblies; (ii) information sufficient to allow Supplier to clear shipments under laws and regulations pertaining to restricted parties and/or prohibited countries; and (iii) other information in Insulet’s possession that Supplier reasonably requests to assist in fulfilling Supplier’s export clearance responsibilities. Insulet shall obtain, at Insulet’s expense, all import licenses and shall pay all import customs duties and fees, as well as carrying out all custom formalities and shall be the importer of record, unless otherwise indicated on
Exhibit A
. Title for the Products shall transfer upon delivery to carrier.
|
b.
|
Anti-Terrorism Measures
. Supplier agrees to designate, (and in the event Insulet designates, then Insulet agrees to designate,) only freight carriers that are currently in compliance with all applicable laws relating to anti-terrorism security measures and to adhere to the C-TPAT (Customs-Trade Partnership Against Terrorism) security recommendations and guidelines as outlined by the United States Bureau of Customs and Border Protection and to prohibit the freight carriage to be sub-contracted to any carrier that is not in compliance with the C-TPAT guidelines.
|
6.
|
Order Procedures; Delivery Schedules; Zones; Stocking Hub; Invoices
.
|
a.
|
Order Procedures
.
|
i.
|
Rolling Forecast / Delivery Schedule
. Unless an alternative procedure is mutually agreed in writing between the Parties, Insulet shall provide Supplier with a rolling forecast and delivery schedule for Products to be purchased under this Agreement
|
ii.
|
Order Methods
. Insulet may place orders under this Agreement for quantities and delivery dates or time periods by giving Supplier prior written notice consistent with the agreed to lead time for the applicable Product as set forth in the applicable
Exhibit
; provided, that if no such lead time is identified, at least [*] ([*]) days prior written notice. These orders may be in the form of the Delivery Schedule described in Section 6(a)(i) above or standard purchase order documents (which may be “standalone” purchase orders or “blanket purchase orders” with quantities scheduled by “releases”) or other written means mutually arranged by the Parties (each a “
Purchase Order
” and collectively the “
Purchase Orders
”). Regardless of the means by which Insulet informs Supplier of quantities and delivery dates, each quantity that Insulet indicates for a particular delivery date or time period is known as a “
Scheduled Delivery
”.
|
b.
|
Delivery Schedules; Updates; Procedure; Changes
. Supplier agrees to supply Scheduled Deliveries that Insulet submits in accordance with Section 6(a) above, as increased or decreased by Insulet within the permitted changes allowed under the Flexibility Table referenced in Section 6(c) below without any expedited cost or expense;
provided
,
however
, that any Scheduled Deliveries may also be cancelled by Insulet in accordance with Section 15 below (Cancellation for Convenience), including the financial responsibility provisions in such Section 15, or cancelled by an applicable party for cause as provided in Section 16 below (Cancellations for Cause, including the financial responsibility provisions in such Section 16); and
provided
,
further
, that if the Parties mutually agree to changes for Scheduled Deliveries that are beyond the scope of the changes permitted in the Flexibility Table, then Supplier shall supply those revised Scheduled Deliveries.
|
c.
|
Zones
. At any particular time, each Scheduled Delivery (or forecasted quantity) is considered to fall into one of a number of zones as shown in the “
Flexibility Table
” attached hereto as
Exhibit B
and incorporated herein by reference (each a “Zone” and collectively the “
Zones
”), depending on how much calendar time remains until the date of that Scheduled Delivery (or forecasted quantity). For any Scheduled Delivery, Insulet may (i) increase or decrease the quantity of Products or (ii) reschedule the quantity of Products and their shipment dates in accordance with the Flexibility Table. In the event that Insulet cancels quantities outside the Frozen Zone beyond the amounts of allowable quantity decreases in the Scheduled Delivery Change Table), such cancellations will be subject to the provisions of Section 15 below (Cancellation for Convenience), including the financial responsibility provisions in such Section 15, or the provisions of Section 16 below (Cancellations for Cause), including the financial responsibility provisions in such Section 16.
|
d.
|
Supplier Response to Purchase Orders and Delivery Schedules
. Whenever Insulet submits Delivery Schedule information, whether by means of a Purchase Order, change order, purchase order “release” or revised Delivery Schedule, Supplier agrees to respond to Insulet (by fax, email or equivalent written media) within [*] ([*]) business days after receipt. The response should confirm receipt of the Purchase Order, change order, release or revised Delivery Schedule and inform Insulet if Supplier objects to any part of that submission as being contrary to the requirements of this Section 6. With respect to the information submitted per this Section 6(d), if Supplier does not object to the Delivery Schedule information within those [*] ([*]) business days, then all portions of the Delivery Schedule will be deemed to comply with the requirements of Section 6.
|
e.
|
Stocking Hub
. If mutually agreed by the Parties from time to time, including quantities and cost in a subsequent written agreement, for Products produced by Supplier which are consumed in a Insulet factory or by another supplier (not Distribution Center), Supplier may agree to establish one (1) or more warehousing sites (each, a “
Hub
”) in or near the respective Insulet factories to which the Products will ultimately be delivered by Supplier. Supplier will stock such of the Products as the Parties may mutually agree at each such Hub from which orders by the applicable Insulet facility(ies) will be fulfilled. Supplier will retain ownership of such Products and shall bear the risk of loss or damage (for which Supplier shall maintain adequate insurance) while at the Hub(s) and until they are delivered to the Insulet facility or Insulet picks them up from the Hub, whichever occurs first. Insulet may terminate the arrangements for a particular Hub or Product(s) on at least [*] ([*]) days’ written notice to Supplier, and upon termination of the Hub, Insulet shall purchase all Products in the Hubs affected by the termination at the applicable Product price.
|
f.
|
Invoices
. Invoices for purchases will be issued to and payable by the Insulet business unit, affiliate or subsidiary that placed the order for the purchases. Similarly, any applicable cancellation charges under Sections 15 or 16 below or materials or components charges under Section 8 below will be payable by the Insulet business unit, affiliate or subsidiary that cancelled the order or for whom the materials or components were
|
7.
|
Supply Chain Profiles.
Insulet shall provide to Supplier and maintain a list of approved materials suppliers (the “
Approved Supplier List
” or “
ASL
”). Supplier agrees to only purchase the materials required to manufacture the Product from suppliers on the then current ASL. Supplier shall prepare supply chain profiles providing the categories of information indicated in
Exhibit C
which is attached hereto and incorporated herein by reference (each, a “
Supply Chain Profile
” and collectively, the “
Supply Chain Profiles
”) for all materials and components used to produce the Products.
|
8.
|
Insulet Responsibility for Obsolete and Aged Items of Component and Materials.
|
a.
|
If Insulet discontinues the purchase of the Products for which such components or materials were purchased or modifies a Product to eliminate the use of a particular component or material, and such components or materials cannot be used within the next [*] ([*]) months in other Products that Supplier is manufacturing for Insulet (“
Obsolete Items
”), then Insulet’s responsibility applies to all such items in Supplier’s inventory that Supplier was authorized to purchase in accordance with the MPQs, VPQs, and lead times identified in the applicable Supply Chain Profile or, in the case that a component or material was not required to be included in the Supply Chain Profiles per Section 7, then the actual MPQs, VPQs, and lead times for such component shall apply; or
|
b.
|
In the event that any material or component procured by Supplier that is not required to satisfy demand in the next [*] ([*]) days, such materials and components become “
Excess Items
”. Insulet shall, upon written demand from Supplier, either: (i) provide Supplier with a Purchase Order for Products to consume Excess Items within [*] ([*]) days or a Purchase Order to purchase the Excess Items themselves, (ii) pay Supplier a cash deposit in the amount of the cost of the Excess Items which shall be reconciled by the Parties quarterly, or (iii) begin paying to Supplier monthly an inventory carrying charge of one and [*] percent ([*]%) of the cost of the Excess Items, plus applicable manufacturing overhead (“
MOH
”).
|
9.
|
Fill Rate
. The dates for Scheduled Deliveries are the dates by which the material must meet Insulet’s Fill Rate requirement. Scheduled Deliveries, in the exact quantities scheduled, between the due date and up to [*] ([*]) Insulet manufacturing days early will be considered on-time. For purposes of this Agreement, “
Fill Rate
” shall mean the Product being received by the appropriate carrier on the date specified by Insulet.
|
10.
|
Quality; Acceptance; Test Data; Failure Analysis
.
|
a.
|
Acceptance criteria for Products is [*] percent ([*]%) conformance to the Specifications and to the requirements set forth in the Quality Agreement attached hereto as
Exhibit D
and incorporated herein by reference (the “Quality Agreement”). Products may be returned within a reasonable time frame if non-conformance to the Specifications is discovered by Insulet at incoming inspection, source inspection, and/or on Insulet's shop floor (e.g., during Insulet's final test of the Insulet products which contain the Products supplied by Supplier). An entire shipment may be rejected based on reasonable sampling by Insulet in light of the nature of the Product and nature of the non‑conformance. Payment for Products does not constitute acceptance if a non‑conformance is subsequently discovered as provided above. Within [*] ([*]) manufacturing days after Supplier receives notification of Product rejection by Insulet, Supplier shall issue a Returned Materials Authorization (“
RMA
”) number to Insulet to facilitate return or disposition of the products. Issuance of the RMA number is procedural only and is not an admission that the Products are nonconforming. If the RMA number is not received in that time, Insulet may return the Products to Supplier without an RMA number.
|
b.
|
For purposes of this Agreement, “
Epidemic Failure Event
” shall mean the occurrence of the same failure resulting from a breach of the Product Warranty (excluding the [*] ([*]) month Product Warranty Period which is replaced by the [*] ([*]) month period in (ii) below) (i) attributable to the same root cause found in [*] percent ([*]%) or more of units of a particular Product, shipped by Supplier during a consecutive [*] ([*]) month period where such failure is verified by Supplier and Insulet, or an independent third party determined by Insulet subject to Supplier’s reasonable consent, such consent not unreasonably withheld; and (ii) occurring within [*] ([*]) months after the date of delivery of the Products.
|
c.
|
Upon occurrence of a suspected Epidemic Failure Event, Insulet shall promptly notify Supplier, and shall provide, if known and as may exist, a description of the failure, and the suspected lot numbers, serial numbers or other identifiers, and delivery dates, of the failed Products. Insulet shall make available to Supplier, samples of the failed Products
|
d.
|
Supplier agrees to execute and deliver, upon request from Insulet, Supplier's standard form of compliance certificate certifying Supplier's compliance with the requirements imposed by this Agreement and by applicable laws, regulations and industry standards and setting forth the country or countries of which the articles are a product. This compliance certificate must identify the shipment by shipment date, part number, revision number, quantity, and lot or serial numbers, as applicable. The compliance certificate must also set forth the country or countries of which the articles are a product.
|
11.
|
Performance Measurements; Quality Performance Scorecard
.
Exhibit E
attached hereto and incorporated herein by reference contains an explanation of the Quality Performance scoring used for the purpose of monitoring the Supplier’s Quality.
|
12.
|
Tooling and Other Property Furnished by Insulet
.
Exhibit F
attached hereto and incorporated herein by reference contains terms and conditions relating to tooling and other manufacturing equipment produced by Supplier for Insulet or provided by Insulet to Supplier for production of Products for Insulet. These terms and conditions are incorporated herein by reference.
|
13.
|
Information for Regulatory Filings; Audits
.
|
a.
|
Supplier agrees to provide Insulet with all information about the Products necessary, in Insulet’s reasonable opinion, to enable Insulet to take the steps needed to permit the marketing and sale of Insulet products into which the Products are incorporated (and to permit the marketing and sale of any other Products which are sold as accessories to any Insulet products) in all jurisdictions in the world in which Insulet chooses to market and sell the Products and such Insulet products. Such steps by Insulet include making regulatory submissions and/or self-certifications, as applicable, and successfully
|
b.
|
Where specific testing is required to comply with the laws governing such regulatory registrations, clearances, approvals and self-certifications, then Insulet shall be responsible for obtaining such testing except where Supplier specifically commits to undertake such testing. Supplier agrees to assist Insulet in developing test protocols for the Insulet products that incorporate the Products and in answering questions from FDA and other regulatory authorities concerning Insulet’s submissions, insofar as such questions relate to any of the Products. Insulet is solely responsible for determining the intended use of the Products and for the validation of the Products and their respective Drawings and Specifications for such intended use.
|
c.
|
Insulet shall have the right to inspect Supplier’s facilities, quality systems and records, and other documentation relating to Supplier’s adherence and performance to the quality standards set forth herein, and to assure compliance, at reasonable times and upon reasonable notice, at least annually during the Term and more often as may reasonably be necessary or desirable to assure quality of the Products and to conduct QA audits.
|
d.
|
Supplier shall cooperate in assisting Insulet in such audits. During any such audits, Insulet shall have full access to Supplier’s facilities used for manufacturing, packaging, testing and storage of Product.
|
14.
|
Disaster Recovery
. Supplier shall provide Insulet with a copy of Supplier's Disaster Recovery Plan (the “
Plan
”) which states policies, procedures and arrangements which Supplier shall adhere to in order to forestall and mitigate some of the disruption and delay in delivery of Products that might otherwise result from force majeure events impacting Supplier or its key vendors such as natural disasters, strikes, government actions, and materials and utility shortages. This Plan may include alternate manufacturing sites, maintaining some materials inventory at a different location, alternate subcontractor sources for materials or manufacturing, etc. Supplier agrees to adhere to all provisions of such Plan during the Term of this Agreement and during any additional period as the Parties continue to do business together under Section 2 above. Supplier understands that Supplier is a key vendor to Insulet and that disruption or delay in delivery of Products to Insulet can have serious impact on Insulet's ability to manufacture and deliver its own products to its customers.
|
15.
|
Cancellations for Convenience
. At any time, Insulet may (i) terminate this Agreement and all Scheduled Deliveries for convenience upon at least [*] ([*]) days’ prior written notice to Supplier or (ii) cancel any Scheduled Deliveries for Insulet’s convenience upon at least [*] ([*]) days’ prior written notice to Supplier (each a “
Cancellation for Convenience
” and together, “
Cancellations for Convenience
”), and this Section 15 shall govern Insulet’s financial obligation to Supplier for such Cancellations for Convenience. Cancellations for Convenience are only cancellations of Scheduled Deliveries by Insulet beyond the quantity of cancellations/reductions allowed under the change provisions of Section 6(c) above, including the Flexibility Table.
|
a.
|
For materials or components allocable to cancelled quantities of Products in Zones for which the Flexibility Table shows a commitment for materials or components, the following amounts as applicable: (i) the actual cost plus applicable MOH of materials and components obtained by Supplier for production of such cancelled quantities, but only for materials or components which Supplier cannot immediately and reasonably divert to other customers or uses, restock to the vendor, or sell at no loss, and provided that Insulet shall not be responsible for materials or components that Supplier has ordered in advance of need or in excess of need (excluding needs to cover the flexibility allowed under the Flexibility Table to make changes to the Scheduled Deliveries), based on the Delivery Schedule and the MPQs, VPQs, and lead times identified in the applicable Supply Chain Profiles; (ii) the restocking charges of Supplier's vendors for materials or components that are restocked to the vendor and cannot be diverted or sold as above (but not including restocking of items that were ordered in advance of need or in excess of need as described above); and (iii) order cancellation charges of Supplier's vendors for materials or components ordered which cannot be diverted as above (but not including cancellation charges for items that were ordered in advance of need or in excess of need as described above); and
|
b.
|
Documented WIP allocable to cancelled quantities of Products in Zones for which the Flexibility Table shows a commitment for WIP which cannot be diverted as above, not to exceed the aggregate price of such canceled Product quantities; and
|
c.
|
Insulet’s purchase price (per this Agreement) for finished goods that are allocable to cancelled quantities of Products in Zones for which the Scheduled Delivery Change Table shows a commitment for finished goods and for finished goods in any Buffer Inventory remaining in any Hub, not to exceed the agreed upon maximum quantity of Buffer Inventory.
|
16.
|
Termination of Agreement; Cancellation of Scheduled Deliveries for Cause
.
|
a.
|
By Insulet
. Any of the following events shall be considered a default by Supplier.
|
i.
|
Supplier fails to meet any material obligation to supply Product pursuant to Section 3 above;
|
ii.
|
Supplier is reasonably placed on “
Limited
” status and fails to abide with reasonable provisions set forth by Insulet in writing to be granted “
Approved
” status within one calendar year;
|
iii.
|
Supplier fails to adhere to the Quality Agreement and such failure is not cured within [*] ([*]) days of written notice by Insulet;
|
iv.
|
Supplier has repeated failures to adhere to the Quality Agreement which in the aggregate are a material failure, even if one or more of such failures has previously been cured under Section 16(a)(iii) above; or
|
v.
|
Supplier breaches Section 21 below.
|
b.
|
By Supplier
. Supplier may terminate this Agreement and any or all Scheduled Deliveries hereunder upon written notice to Insulet in the event that Insulet, (or in the case of a Scheduled Delivery requested by an affiliate, such affiliate), fails to pay any amounts when due (other than amounts which are disputed in good faith), and such failure is not cured within [*] ([*]) days after Supplier has notified Insulet in writing that such amounts are overdue and not paid and that Supplier intends to terminate this Agreement or certain Scheduled Deliveries if such amounts are not paid within the [*] ([*]) day cure period. In the event that Supplier terminates this Agreement and/or any or all outstanding Scheduled Deliveries under this Section 16(b), then Insulet shall have the same financial responsibility to Supplier with respect to materials, components, WIP and finished goods as Insulet would have in the case of a Cancellation for Convenience by Insulet and that Insulet would have in the case of Insulet discontinuing the purchase of Products.
|
c.
|
By Either Party
. In the event that either Party:
|
i.
|
becomes insolvent, has a receiver appointed, files voluntarily under the bankruptcy laws, is filed against involuntarily under the bankruptcy laws and such filing is not dismissed within sixty (60) days, or is prohibited by regulatory authorities, law or court action from performing its material obligations hereunder;
|
ii.
|
commits a material breach of this Agreement which is not capable of being cured, or
|
iii.
|
fails to cure any material breach under this Agreement (other than a breach covered by Sections 16(a) or (b) above) within [*] ([*]) days after written notice from the other Party that such breach exists and that such other Party will terminate this Agreement if such breach is not cured,
|
d.
|
Final Order.
In addition, upon payment by Insulet of all outstanding amounts due and owing, and subject to the payment terms set forth herein, unless otherwise agreed to by the Parties, (i) Supplier shall upon Insulet’s request manufacture another [*] ([*]) months continuous supply of Product, based on the previous forecast period average, or such other amount as agreed to by the Parties, at the prices in effect at termination (“
Final Order
”). Insulet shall purchase all Product manufactured by Supplier under this Final Order and such Products will be invoiced and delivered during such [*] ([*]) month period as requested by Insulet. In addition, if Insulet terminates the Final Order, Insulet shall be liable for Products, WIP, material and components under the terms of Section 15.
|
17.
|
Warranty
. Supplier shall provide the following Product Warranty and Automation Equipment Warranty (as defined below, and collectively, the “
Warranty
”):
|
a.
|
Product Warranty
. Supplier warrants that, at the time of delivery to Insulet and for [*] ([*]) months from the date of delivery to Insulet (the “
Product Warranty Period
”), Products will (i) [*] and (ii) [*], except with respect to [*] which are [*] for which Supplier makes no warranty other than [*] (“
Product Warranty
”). Supplier agrees to pass along any and all warranties from services, and component and material vendors with respect to any components, materials or services included in the Products. To the extent that Supplier breaches any of the warranties contained herein, Supplier shall [*]. Supplier shall pay or reimburse Insulet for shipping charges to return Non-conforming Products and shipping charges on replacement Products. Supplier shall ship replacement Products for Non-conforming Products [*] at Supplier’s expense. In the event no defect is found, Insulet shall bear the cost of shipping and expedites, if applicable. For purposes of this Agreement: “
Non-conforming Products
” are Products that fail to conform to the Specifications or to the requirements of the Quality Agreement.
|
b.
|
Automation Equipment Warranty
. Supplier warrants that, at the time of acceptance and delivery to Insulet and for [*] ([*]) months from that date of delivery (the “
Automation Equipment Warranty Period
”), the automation equipment owned by Insulet listed on
Exhibit G
(the “
Automation Equipment
”) will (a) [*] and (b) [*], except with respect to [*] for which Supplier makes no warranty other than [*] (“
Automation Equipment Warranty”
). To the extent Supplier actually receives from a third party supplier of equipment or manufacturing services the benefit arising from said supplier’s warranty obligations related to its equipment or manufacturing services, Supplier shall transfer such benefit to Insulet (without any actual liability for such vendor’s warranty obligations).
|
c.
|
Affected Products
. In the event that Supplier supplies any Non‑conforming Products to Insulet (including those in transit), and those Products have been resold by Insulet or incorporated into finished Insulet products or WIP (the “
Affected Products
”), and to the extent the Affected Products are as a result of a breach of the Product Warranty (excluding the [*] ([*]) month Product Warranty Period which is replaced by the [*] ([*]) month period in this paragraph), within [*] ([*]) months from their respective dates of
|
18.
|
Field Performance; Quality Upgrades and Corrections
.
|
a.
|
General
. The Parties will identify aspects of the Products that can benefit from improvement including manufacturing changes and hardware and/or software changes. In addition, there may be aspects of the Products that will require correction. This Section 18 specifies the Parties' responsibilities and the actions to be taken in respect to such improvements and corrections.
|
b.
|
Improvements and Corrections
.
|
i.
|
Improvements
. Either party may request that Supplier incorporate engineering changes into the Product or Specifications pursuant to Section 3(c) above. Supplier shall proceed with engineering changes when the parties have agreed upon the changes to the Specifications, delivery schedule and adjustments to the pricing, and Insulet has agreed to reimburse Supplier the implementation costs and adjust Product pricing, as applicable.
|
ii.
|
Corrective Actions.
In the event a corrective action is required to address a Product issue, safety hazard or regulatory violation, upon the agreement of the Parties,
|
iii.
|
Minor Impact
. If any aspect of the manufacture, for which Supplier is responsible, is such that a Product does not conform to the Specification but such non-conformance does not significantly reduce the value of the Product or products used with it to the end-user and does not constitute a safety hazard or regulatory violation, then the Parties shall take reasonable steps to identify changes to the manufacture that, upon approval of Insulet, can be implemented in future production, including future releases of the Product, and will then carry out such steps pursuant to Section 3(c) above.
|
19.
|
Indemnification; Limitations of Liability
.
|
a.
|
Insulet shall defend, indemnify and hold Supplier and its subsidiaries, affiliates, officers, directors, employees or agents harmless against claims, liabilities, losses, costs and expenses (including reasonable attorneys' fees) with respect to a claim by a third party arising from death or bodily injury caused by a Product or the negligent or intentional acts or omissions, of Insulet or its officers, employees, subcontractors, subject to the limitations set forth in Section 21(e); provided however, that Insulet shall have no obligation to indemnify Supplier to the extent the claim against Supplier is a claim for which Supplier must indemnify Insulet under Section 19(b) above.
|
b.
|
In no event shall Supplier be liable for (i) Product design deficiencies (ii) malfunctions, defects, or failures resulting from misuse; abuse; accident; neglect; improper installation, operation or maintenance; theft; vandalism; acts of God; power failures or surges; casualty; or alteration, modification, or repairs by any party other than Supplier, (iii) defects in third party materials or components incorporated into the Products or services performed by third parties specified by Insulet, unless the presence of the defective component or material in the Product, or defect in services performed by third parties specified by Insulet, delivered to Insulet is due to Supplier’s failure perform tests required by the Specifications; and (iv) a defect that would have been discovered by Supplier prior to shipment of the Product to Insulet but for the fact that Insulet directed Supplier to ship the Product without performing the test (which Supplier was otherwise required to perform) that would have led Supplier to discover the defect.
|
c.
|
IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY OR THEIR RESPECIVE AFFILIATES BE LIABLE FOR ANY INCIDENTAL DAMAGES, EXEMPLARY DAMAGES, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS), OR LOSS OF BUSINESS, RECORDS, DATA, USE, REVENUE, OR ANTICIPATED SAVINGS, OR OTHER ECONOMIC LOSS, WHETHER OR NOT THE PARTY WAS INFORMED OR AWARE OF THE POSSIBILITY OF SUCH DAMAGES OR LOSS AND NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY REMEDY; PROVIDED, HOWEVER, THAT THIS SECTION 19(e) IS NOT INTENDED TO AND DOES NOT OVERRIDE THE EXPRESS PROVISIONS OF SECTIONS 10, 17, 18, 19 AND 21 TO THE EXTENT SUCH PROVISIONS PROVIDE FOR REMEDIES WHICH WOULD BE OTHERWISE LIMITED BY THIS SECTION 19(e).
|
d.
|
SUPPLIER’S TOTAL LIABILITY TO INSULET HEREUNDER SHALL BE SUBJECT TO AN AGGREGATE CAP IN ACCORDANCE WITH THE FOLLOWING: THE TOTAL, AGGREGATE AND CUMULATIVE LIABILITY OF SUPPLIER, IF ANY, FOR DAMAGES FOR ALL CLAIMS UNDER THIS AGREEMENT OF ANY KIND WHATSOVER, REGARDLESS OF LEGAL THEORY, AND WHETHER ARISING IN TORT OR CONTRACT, SHALL NOT EXCEED AT ANY GIVEN TIME AN AMOUNT DETERMINED AS FOLLOWS: (I) WITH RESPECT TO CLAIMS RESULTING FROM SECTION 17(C), [*] AND (II) FOR ANY OTHER CLAIM, [*]. NOTWITHSTANDING THE FOREGOING, THE CAP SET FORTH IN THE PREVIOUS SENTENCE SHALL NOT APPLY TO LIMIT (I) INSULET’S OR ITS AFFILIATES OR OTHER HIGHER LEVEL SUPPLIERS OBLIGATION HEREUNDER FOR PAYMENTS FOR PRODUCT, MATERIALS OR OTHER CHARGES, (II) A PARTY’S OBLIGATION HEREUNDER TO INDEMNIFY THE OTHER PARTY; (III) A PARTY’S OBLIGATION OF CONFIDENTIALITY IN SECTION 21(A); (IV) A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; OR (V) SUPPLIER’S WARRANTY OBLIGATIONS IN SECTION 17 HEREUNDER.
|
20.
|
Insurance
. Throughout the Term of this Agreement, Supplier shall carry (a) Commercial General Liability Insurance in a minimum amount of US$[*] Combined Single Limit, Bodily Injury and Property Damage and (ii) Product Recall insurance covering the actual costs sustained in recalling
|
21.
|
Proprietary Information; Intellectual Property
.
|
a.
|
Proprietary Information
.
|
(i)
|
Any information which a party shall obtain regarding the other party in connection with this Agreement (“
Proprietary Information
”) shall be maintained in confidence by the receiving party and shall not be used by the receiving party or disclosed to a third party except with the disclosing party's prior written consent. The receiving party shall only disclose the other party’s Proprietary Information to those of its employees who need to know such Proprietary Information in order for the receiving party to fulfill its obligations hereunder. Receiving Party hereby agrees that any of its responsible officers, Affiliates, consultants, contractors and employees to whom Confidential Information is disclosed shall be advised that such information is confidential and shall be instructed not to disclose any of such information to any third party or to any non-authorized employee without first obtaining the prior written consent of the Disclosing Party. Receiving Party agrees to be responsible for the compliance with this Agreement by its responsible officers, Affiliates, consultants, contractors and employees. The confidentiality obligations in this section shall not apply to Proprietary Information which (a) becomes public other than through the receiving party, (b) is already known to the receiving party as evidenced by its written records, (c) becomes known by the receiving party in the future from another source which is under no obligation of confidentiality to the disclosing party, or (d) is subsequently developed by the receiving party in a manner which it can establish was independent of the disclosure hereunder. The obligations of Supplier and Insulet pursuant to the provisions of this section shall survive termination of this Agreement for a period of [*] ([*]) years.
|
(ii)
|
In the event that the recipient of Proprietary Information is requested or becomes legally compelled to disclose any of the Proprietary Information (whether by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process or otherwise), such recipient party will provide the disclosing party with prompt notice, to the extent practicable, so that the disclosing party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this section related to confidentiality. In the event that such protective order or other remedy is not obtained, the disclosing party agrees that such disclosure may be made without liability hereunder; provided that the recipient party (a) furnishes only that portion of the Proprietary Information which the recipient party is, in the opinion of its counsel, legally required to disclose, and (b) uses its reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Proprietary Information.
|
(iii)
|
Neither party hereto shall make, or permit any of their respective directors, officers, employees, agents, advisors, affiliates or representatives to make any press release, public announcement or other public disclosure with respect to the existence of this Agreement or the terms hereof without the prior consent of the other party hereto.
|
b.
|
Intellectual Property
. Each party’s intellectual property including without limitation any patents, trade secrets, processes, know-how, copyrights, trade dress, trademarks and/or trade names shall remain their exclusive property and except as provided in Section 21(g) below, nothing herein shall be construed as transferring any right, title or interest of any kind or nature whatsoever thereto to the other party hereto. Furthermore, Supplier hereby agrees that the Specifications are owned exclusively by Insulet and nothing herein shall be construed as transferring any right, title or interest of any kind or nature whatsoever thereto to Supplier. Except as specifically provided herein, neither party shall use in any way, the intellectual property of the other party, and will not do any act which would in any way infringe upon or be in derogation of the validity of such other party’s intellectual property and will notify the other party of any conflicting claims that challenge any intellectual property of such party that it is aware of.
|
c.
|
Infringement Indemnification by Supplier
. Supplier will indemnify and defend, at its expense, any suit or proceeding against Insulet, and any of its subsidiaries, affiliates, officers, directors, employees or agents, in a court of competent jurisdiction for infringement of patents, copyrights, trade secret rights or other intellectual property rights by Products purchased hereunder (an “
Infringement Action against Insulet
”) but only to the extent that such Infringement Action against Insulet is based on one or more of the following: Supplier’s manufacturing processes; Supplier’s off-the-shelf components where Supplier owns and controls the design of such components; [*]. Supplier shall pay all damages and costs awarded against Insulet because of infringement covered by this indemnification by Supplier.
|
d.
|
Infringement Indemnification by Insulet
. Insulet will indemnify and defend, at its expense, any suit or proceeding against Supplier, any of its subsidiaries, affiliates, officers, directors, employees or agents, in a court of competent jurisdiction for infringement of patents, copyrights, trade secret rights or other intellectual property rights by Products purchased hereunder (an “
Infringement Action against Supplier
”) except to the extent that such Infringement Action against Supplier is based on one or more of the circumstances listed in Section 21(c) above. Insulet shall pay all damages and costs finally awarded against Supplier because of infringement covered by this indemnification by Insulet.
|
e.
|
Limitations
. Each Party’s duties under Sections 19(b) and (c) and 21(c) and (d) above are conditioned on the Party claiming indemnification giving the indemnifying Party prompt written notice of commencement of any suit or proceeding or any written claim of infringement and furnishing to such indemnifying Party a copy of each communication relating to the alleged infringement and giving to such indemnifying Party all authority (including the right to exclusive control of defense of any such suit or proceeding), information and assistance (at such indemnifying Party’s expense) necessary to defend or settle such suit or proceeding. An indemnifying Party shall not be bound by any settlement made without such indemnifying Party’s prior written consent.
|
f.
|
Software/firmware
. Insulet retains all right, title and interest in and to any software and/or firmware contained in the memory devices to be included in Products purchased hereunder, which Supplier will be purchasing, preprogrammed, from Insulet’s approved supplier. Insulet grants Supplier a perpetual, non-exclusive, world-wide, royalty-free license to use such software/firmware in the Products produced for Insulet.
|
g.
|
License.
[*].
|
22.
|
Short Supply/End of Life Components, Material, Software and Firmware
.
|
a.
|
Should any material or component be in short supply so that Supplier's needs exceed market availability, then Supplier agrees that, with respect to material purchased or ordered specifically for manufacture of the Products, Supplier will not utilize such material for other than the manufacture of Products for Insulet. In addition, any such component or material that has been paid for by Insulet or has been acquired at the specific request of Insulet shall be used only to manufacture Products for Insulet.
|
b.
|
Should any material, component software or firmware be discontinued or set for end of life by the applicable vendor, Supply hereby agrees to use commercially reasonable efforts to provide Insulet with no less than [*] ([*]) months’ notice of such event as available by material suppliers. Supplier agrees to purchase sufficient quantities of the foregoing in order to supply Insulet Products as agreed to by the Parties. In addition, Supplier agrees to work with Insulet in order to find a replacement which meets the form, fit and function set out in the Specifications of such end of life component, material, software or firmware. (Such replacements of end of life materials, components, software and firmware are subject to the applicable change order procedures of the Quality Agreement.) In the case of software and firmware, any replacement pursuant to this Section shall be backward compatible. Furthermore, Supplier shall include such a provision in all of its contracts with its component and material vendors who are providing parts for inclusion in the Products.
|
23.
|
Accurate Documentation
. Supplier understands that in order to have efficient administration of incoming shipments and the manufacturing process, it is essential that Supplier provide complete and accurate documentation and labeling in accordance with this Agreement, including without limitation, the Specifications and Quality Agreement. Failure to provide complete and accurate documentation and labeling shall be considered a breach of the Agreement pursuant to Section 16.
|
24.
|
Force Majeure
. The obligations of the Parties shall be subject to, and waived during the continuance of, any cause constituting force majeure which herein shall be defined as any cause beyond the reasonable control of a Party which prevents or hinders the performance of such Party and shall include, without limitation, acts of God, acts of terrorism (whether actual or threatened), governmental intervention and labor strikes. Financial or commercial difficulties shall not be considered as force majeure. In the event that any force majeure condition may delay shipment of Products by Supplier, Supplier shall promptly inform Insulet of the expected delay.
|
25.
|
Compliance with Laws
. Where applicable, all shipments hereunder shall be made in accordance with the federal Hazardous Materials Transportation Control Act and regulations thereunder. Supplier guarantees that no article or material manufactured to Specifications delivered hereunder will be adulterated or misbranded upon delivery under 21 USC Sections 351, 352 and 355 or 15
|
26.
|
Assignment
. Neither this Agreement nor any Purchase Order or rights hereunder may be assigned by either Party without the prior written consent of the other Party, and any attempted assignment without such consent shall be void;
provided
,
however
, that either Party may assign this Agreement to any successor entity or to a subsidiary or affiliate or to a purchaser of the business unit to which this Agreement relates provided that any such assignment shall be subject to reasonable credit conditions in light of the creditworthiness of the assignee and, with respect to assignment by Supplier, such right to assign shall be subject to the assignee satisfying reasonable vendor qualification standards, including quality audit. Also, if any of the business units of Insulet that are purchasing hereunder are sold or otherwise divested from Insulet, then the new owner of such business unit may, subject to reasonable credit requirements, for up to [*] ([*]) months (but not beyond the scheduled expiration without renewal of this Agreement), continue purchasing from Supplier, solely for the benefit of such business unit(s) and under the same prices, terms and conditions that would apply under this Agreement, such Products as such business unit(s) was (were) previously purchasing under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties. Notwithstanding the foregoing, Supplier may subcontract, delegate or assign some or all of its rights and obligations under this Agreement to an Affiliate of Supplier to perform the Services or to a third party financial institution for the purpose of receivables financing (e.g., factoring);
provided
,
however
, in each, Supplier shall remain liable to Insulet for the performance of its obligations hereunder.
|
27.
|
Severability
. Should any provision of this Agreement be finally determined to contravene any applicable law or governmental regulation, thereupon such provision shall be automatically terminated and performance thereof by both Parties waived, or should such provision be reasonably considered by either Party to be an essential element of this Agreement, the Parties hereto shall negotiate a new provision. If the Parties are unable to agree in writing upon the terms of such new provision within [*] ([*]) days of the contravening provision's termination, then the entire Agreement will terminate automatically thereupon.
|
28.
|
Notices
. Any notice given hereunder shall be deemed given at the times set forth in this Section 28 if sent, all charges prepaid, to the Parties at the addresses set forth at the beginning of this Agreement and to the attention of the persons indicated below (or the persons who succeed to those persons' functions). A Party may change the address to which notices must be sent, or the person to whose attention they should be directed, by giving notice hereunder to the other Party. The times at which notices will be deemed given are: three (3) business days after being sent by certified or registered mail, return receipt requested; two (2) business days after being sent by recognized courier; or immediately upon receipt by personal delivery. The designated persons to whom notices should be directed are:
|
With a copy to:
|
With a copy to:
|
6201 America Center Drive
|
General Counsel
|
San Jose, CA 95002, USA
|
Insulet Corporation
|
29.
|
Choice of Law; Attorneys' Fees
. This Agreement and all orders hereunder shall for all purposes be governed exclusively by New York law (excluding choice of law rules). IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, WHETHER IT RESULTS IN PROCEEDINGS IN ANY COURT IN ANY JURISDICTION, THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY, AND HAVING HAD AN OPPORTUNITY TO CONSULT WITH COUNSEL, WAIVE ALL RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW. To the extent applicable, in the event of any lawsuit between the parties arising out of or related to this Agreement, the parties agree to prepare and to timely file in the applicable court a mutual consent to waive any statutory or other requirements for a trial by jury.
|
30.
|
Miscellaneous
. A Party's failure on any occasion to insist on strict performance of any term or condition hereof shall not constitute a waiver of compliance with such term or condition on any other occasion or a waiver of any default. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an original and all of which together shall be deemed the same instrument. All Products furnished by Supplier hereunder shall be free of all liens and encumbrances, and at Insulet's request, Supplier shall deliver to Insulet a release of all liens or other evidence thereof satisfactory to Insulet. This Agreement may only be modified or amended in writing signed by an authorized representative of each party.
|
31.
|
Exhibits
. The following Exhibits are attached hereto and made a part of this Agreement:
|
32.
|
Clauses Incorporated by Reference
. This Agreement incorporates CFR 52.212-5(e)(1) of the Federal Acquisition Regulation by reference, with the same force and effect as if it were given in full text herein. Insulet agrees to notify Supplier in writing [*] ([*]) days prior to ordering any Product for
|
INSULET CORPORATION
|
FLEXTRONICS MEDICAL SALES AND MARKETING, LTD
|
A.
|
Products:
|
Drawing
|
Description
|
Family
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
[*]
|
[*]
|
[*]
pod
|
|
|
|
Drawing
|
Description
|
Family
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
[*]
|
[*]
|
PDM
|
2.
|
[*]
|
|
|
[*]
|
|||
Drawing
|
Description
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
|
|
|
|
|
|
|
[*]
|
|
||
Drawing
|
Description
|
[*]
|
[*]
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
3.
|
[*]
Pricing Process for
[*]
:
|
1.
|
[*]
shall be reviewed
[*].
|
2.
|
Insulet shall review the
[*]
and provide feedback, if any, to Supplier.
|
3.
|
Supplier shall revise the
[*].
|
4.
|
Insulet shall review the
[*]
and provide feedback, if any, to Supplier, within
[*]
business days of receipt.
|
4.
|
For each Product requested by Insulet, Supplier shall provide Insulet
[*]
:
|
5.
|
[*]
pursuant to this Section must be submitted to Insulet by the
[*]
. In the event that Insulet believes that
[*]
, Insulet shall provide notification of such disagreement in writing within
[*]
business days to its Supplier Relationship Manager or any of his/her superiors. The two Parties shall then review. In the event that the two Parties cannot agree within 3 business days, the
[*]
. Once the dispute is resolved (following, if necessary, Insulet’s administration of its
[*]
), a credit shall be paid to Insulet for any amounts overcharged by
[*]
or Insulet shall pay an invoice for any amounts undercharged by
[*]
.
|
6.
|
Insulet shall issue a
[*]
, pursuant to the submitted
[*]
, before the end of
[*]
|
|
|
|||||
Zone
|
Insulet Commitment Level
|
# of days before Scheduled Delivery Shipment Date
|
[*]
|
[*]
|
[*]
*
|
|
1 (“[*]”)
|
[*]
|
[*]
|
None
|
None
|
None
|
|
2 (“[*]”)
|
[*]
|
[*]
|
[*]**
|
[*]%
|
[*]
|
|
3 (“[*]”)
|
[*]
|
[*] or more
|
[*]%***
|
[*]%
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
2)
|
Supplier shall advise Insulet of the [*] for each [*]. [*]shall be the subject of a [*]by both Parties. [*] include without limitation:
|
(a)
|
[*] is a component that can be [*] or can be used on [*]. Insulet does not accept [*].
|
(b)
|
[*] is a component that is [*] or is [*] and cannot be [*] or any other [*].
|
1.0
|
Purchase of New Tooling; Modifications
|
(a)
|
Price, which at a minimum shall include;
|
(b)
|
Quote must be supplied on [*] provided in the [*]
|
(c)
|
All Insulet specified samples required at each stage in the tool design and approval process
|
(d)
|
[*] quantity of spare parts
|
(e)
|
Responsibility for all tool maintenance throughout the tool life
|
1.3
|
Order; Further Procedures
. If Insulet accepts the Quote and places an order, the order will be subject to [*] (unless otherwise indicated in the RFQ or the Quote), which must be [*]. The price applicable to the order shall be [*], subject to [*]. All price changes are subject to [*].
|
2.0
|
Use and Maintenance of Tooling
.
|
2.4
|
[*]. Supplier shall maintain [*] (and shall provide Insulet with [*] on request).
|
|
|
L2
|
L3
|
L4
|
||
Item
|
Machine
|
Warranty (yr)
|
Warranty (yr)
|
Warranty (yr)
|
SAT/OQ
|
Expired
|
1
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
2
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
3
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
4
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
5
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
6
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
7
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
8
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
A.
|
ATS and its Affiliates are leading providers of design, development, manufacture and testing of automation technology and solutions for the world's leading manufacturers;
|
B.
|
Insulet and its Affiliates are in the business of designing, manufacturing and marketing innovative medical devices; and
|
C.
|
Insulet (and/or certain of its Affiliates) may, from time to time, desire to engage ATS (or an ATS Affiliate) for the design, development, manufacture and/or testing of such automation technology and/or solutions.
|
(a)
|
[*]% of [*] upon [*];
|
(b)
|
[*]% of [*] at [*];
|
(c)
|
[*]% at [*]; and
|
(d)
|
[*]% at [*].
|
(a)
|
Provide Seller with:
|
i)
|
all necessary information;
|
ii)
|
access to Customer personnel and appropriate subject matter experts;
|
iii)
|
all required production quality sample parts (within the tolerances upon which the Proposal was prepared), reasonably required by Seller to design, manufacture, debug, test, install and commission the Product (and/or other Deliverables, as applicable);
|
iv)
|
clear and reasonable access to those portions of Installation Site required by Seller for installation, debug, commissioning and testing of the Product (and/or other Deliverables, as applicable) in a condition ready to receive the Product (and/or other Deliverables, as applicable); and
|
v)
|
cooperation of Customer’s contract manufacturer (if any) in the event that the Products are operated by a contract manufacturer engaged by Customer, and/or are located in an Installation Site owned and/or operated by a contract manufacturer engaged by Customer;
|
(b)
|
Review for accuracy, completeness and conformance to this Agreement, any and all documents submitted by Seller to Customer for comment or approval, and advise Seller in writing of any material issues associated with such documents within
[*]
(
[*]
) business days of submission or resubmission.
|
(a)
|
Within
[*]
(
[*]
) days following completion of design review for the Products, Seller and Customer shall agree in writing upon an acceptance test plan (“
Test Plan
”) setting out the criteria to be met, and the testing process to be employed, during the FAT (as defined below) and the SAT (as defined
|
(b)
|
A factory acceptance test (“
FAT
”) shall be performed at Seller’s facility or such facilities of Seller’s subcontractors as may be agreed upon in writing by the parties and shall commence within
[*]
(
[*]
) business days following notice from Seller to Customer confirming completion of the Products, or at such other time as may be agreed upon in writing by the parties. Such testing shall be carried out together by Customer and Seller in accordance with the Test Plan. The FAT shall be deemed successful when
[*]
the results of the testing are in compliance with the Test Plan’s criteria, at which point the Products are authorized for shipment to the Installation Site.
|
(c)
|
A Customer site acceptance test (“
SAT
”) shall be performed at the Installation Site within
[*]
(
[*]
) business days of the completion of installation of the Products at the Installation Site. Such testing shall be carried out together by Customer and Seller in accordance with the Test Plan. The SAT shall be deemed successful when
[*]
the results of the testing are in compliance with the Test Plan’s criteria, at which point the Products have achieved final acceptance by the Customer.
|
(d)
|
Seller shall carry out such remedial work as is necessary to achieve a successful FAT and SAT
[*]
, provided that any additional changes requested by Customer beyond those set forth in the Specifications may require additional charges which shall be determined by mutual agreement by both parties and reflected in a change order executed by the parties in accordance with Section 8 (Changes). Once remedial work is complete, the Products will be re-tested and this process shall continue until a successful FAT and SAT is achieved in accordance with this Section 10.
|
(e)
|
In the event Seller and Customer are unable to agree upon a Test Plan within the time period provided for in sub-section (a) above, the parties shall immediately escalate the issue within their organizations.
|
(a)
|
either party and/or their Affiliates, or their respective employees, officers, directors, suppliers or subcontractors be liable for any indirect, special, consequential, incidental or punitive damages,
|
(b)
|
either party’s liability to the other party for any loss or damage arising out of, connected with, or resulting from the Agreement, performance or breach of the Agreement, or the Deliverables and/or Services covered by or furnished under the Agreement, exceed [*].
|
(a)
|
Customer is not a citizen, national, permanent resident of, or incorporated or organized to do business in, and is not under the control of a government which is subject to economic sanctions or embargoes imposed by the United States or Canadian government, or to any other destination to which the United States or Canadian governments may in the future prohibit exports. Customer will not sell, export, re-export or cause to be exported items or any related technology or software, directly (or indirectly through its agents or employees) to the above mentioned countries or to citizens, nationals or permanent residents of those countries.
|
(b)
|
Customer is eligible to receive exports of the Deliverables. Customer has not been deemed by the United States or Canadian governments to be ineligible to receive exports and, in particular, is not listed on any of OFAC’s list of Specially Designated Nationals or on the U.S. Department of Commerce’s Table of Denial Orders or Entity List or Unverified List, or any designated persons listed under the various special economic measures regulations published by the government of
|
(c)
|
Customer will not use the Deliverables and will not enable the Deliverables to be used for any purposes prohibited by United States or Canadian export laws and regulations, including, without limitation, the development, design, manufacture or production of nuclear, missile, chemical and biological weapons and technology, or other defense articles and/or defense services as defined in the US Munitions List pursuant to the
Arms Export Control Act
[22 U.S.C. 2778 (a)] or the Canadian Export Control List pursuant to the Defense Production Act , R.S.C., 1985, c. D-1.
|
(d)
|
Customer shall be the importer of record, and shall be responsible for obtaining all import licenses and permits as may be required to import the Deliverables into such countries as are subject to this Agreement in accordance with the prevailing laws and regulations of such countries. All such filings and registrations of the Deliverables shall be in Customer’s name. Seller shall provide reasonable cooperation to Customer in its efforts to obtain any such approvals.
|
(e)
|
Customer agrees to keep records of its import declaration and all related customs documentation for a minimum of [*] ([*]) years or such period as required by applicable law, whichever is greater, and shall make those records available to Seller upon request.
|
(f)
|
Customer shall indemnify and hold harmless the Releasees for, from and against any claim that may arise as a result of Customer’s breach of its obligations under this Section.
|
(a)
|
At Customer’s request, Customer and Seller will [*] mutually satisfactory to the parties [*] that will govern [*] that will [*], including any applicable [*].
|
(b)
|
Customer shall bear all costs with respect to [*].
|
(c)
|
The balance of the provisions within this Section shall apply if Customer requests [*].
|
(d)
|
Within [*] ([*]) days of the date of successful achievement of SAT of the Product, Seller shall [*]. Seller shall promptly confirm the [*].
|
(e)
|
[*] shall provide and [*] shall be [*] after the date of successful achievement of SAT (“[*]”).
|
(f)
|
[*] shall include a copy of this Section 33 of this Agreement and shall include [*] provided for in this Section 33 of this Agreement.
|
(g)
|
Provided that Customer is not then in material default under this Agreement, in the event that [*] (“[*]”), [*].
|
(h)
|
Upon the occurrence of [*] and [*] ([*]) days advance written notice to Seller, Customer may [*]. [*] only if the [*] timely delivery of the required notice to Seller, and provided that Seller has not given written notice [*] of Seller’s intent to contest the occurrence of [*].
|
(i)
|
In the event of an [*] pursuant to Subsection 33(h), Seller [*].
|
ATS AUTOMATION TOOLING SYSTEMS INC.
By: ____________________________________
Name: __________________________________
Title: ___________________________________
Date: ___________________________________
|
INSULET CORPORATION
By: ________________________________
Name: ______________________________
Title: _______________________________
Date: _______________________________
|
1.
|
In addition to the Standard Documentation Package, and upon request by Customer, Seller will [*] (“
Additional Documentation
”).
|
2.
|
Additional Documentation shall not include:
|
a.
|
[*]; and
|
b.
|
any [*] that [*] provided that Customer consents in writing to have [*] and not having [*].
|
3.
|
Customer’s request for the Additional Documentation must be made directly to [*] to which access shall be provided within [*] ([*])[*] of request.
|
4.
|
Customer’s access to the Additional Documentation will be provided only [*]. Access to the [*] will be restricted to [*]. Customer’s use of the Additional Documentation [*] shall be limited to [*].
|
5.
|
Customer shall not make or retain copies of the Additional Documentation (or any of its contents) in any form or media, including without limitation screen shots, without the prior express written approval of Seller.
|
6.
|
Any Confidential Information provided by Seller (including the Additional Documentation) will remain the Confidential Information of Seller, shall not be disclosed to any third party outside Customer without express written consent from Seller not to be unreasonably withheld, and shall at all times be subject to the confidentiality provisions of the Agreement and the NDA.
|
7.
|
Following a Customer Modification, Customer shall be provided with [*] related to and necessary for [*], subject to the obligations of confidentiality under Section 6 of this
Schedule 1 - Access to Confidential and Proprietary Information.
For example, the parties anticipate that Customer may [*], for which Seller’s consent will be sought and reasonably given where [*].
|
8.
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1.
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During the warranty period defined in Section 14 of the Agreement, Customer shall [*], and Seller shall [*], based on a [*] to be agreed upon by the parties prior to Final Acceptance.
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2.
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Prior to Final Acceptance, Seller will provide Customer with [*] so that Customer, if it desires, may after the applicable warranty period [*]. If requested by Customer, Seller will use reasonable efforts to [*] and [*].
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3.
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Following the applicable warranty period, Seller shall [*] for the [*], based on a [*] to be reviewed and agreed upon by the parties on an annual basis.
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4.
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In the event of an emergency during the warranty period where Seller is [*] is having or is reasonably anticipated to have [*], Customer may utilize the [*] which is necessary to [*]. During the warranty period, any such [*]; following such emergency, Customer shall notify Seller who shall have the right to [*] and if necessary, [*].
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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/s/ Patrick J. Sullivan
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Patrick J. Sullivan
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Chief Executive Officer
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Date: November 4, 2016
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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|
|
|
|
/s/ Michael L. Levitz
|
|
Michael L. Levitz
|
|
Chief Financial Officer
|
|
|
|
Date: November 4, 2016
|
|
|
|
/s/ Patrick J. Sullivan
|
|
Patrick J. Sullivan
|
|
Chief Executive Officer
|
|
|
|
Date: November 4, 2016
|
|
|
|
/s/ Michael L. Levitz
|
|
Michael L. Levitz
|
|
Chief Financial Officer
|
|
|
|
Date: November 4, 2016
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|